Your rights and things to watch out for when buying goods or services with a credit card.
How it works
You can use credit cards to buy goods and services in New Zealand, overseas and online. Each time you use your credit card to buy something, you borrow money from the card issuer.
If you pay off your credit card bill in full each month, you will not be charged interest on the money you have borrowed (unless you have withdrawn cash off your card). If you only pay some of it off, the balance will be carried over to the next month and you will be charged interest on the money owing. The interest will be added to the amount you owe. Credit cards usually have high interest rates.
If you don't pay your credit card off in full each month, the interest you pay can mean you end up paying far more for items you buy.
Understand the true cost
Banks and credit companies must have a minimum repayment warning on monthly credit card statements to emphasise the high costs if you only make the minimum repayments each month.
Not all shops accept credit cards, and some stores charge a credit card administration fee. You are also likely to pay a currency conversion charge if you use your credit card overseas or on foreign websites.
Many credit cards now use contactless card technology such as Visa payWave and MasterCardPayPass, which let you pay simply by holding your card next to the payment machine (rather than swiping or inserting the card).
Some credit cards earn reward points when you spend on your card.
Most banks offer Visa Debit or Debit MasterCard. These cards are linked to your bank account like EFTPOS cards so you spend using your own money, but you can use them like credit cards to buy online or pay at contactless terminals.
When you borrow money for personal use, the Credit Contracts and Consumer Finance Act (CCCFA) ensures you are able to make informed choices, know what you are agreeing to, and can keep track of your debts.
Credit Contracts and Consumer Finance Act
If you exceed your credit card limit, you may be charged default interest. As a credit card account is a consumer credit contract, you are protected by the laws for consumer credit and borrowing money, including full disclosure of fees.
Understanding credit contracts
Credit card providers sometimes offer balance transfer deals with a low rate to get you to switch your credit card balance to them. Always check how long the special rate lasts, as you may end up paying a much higher rate when the special rate ends.
Transferring credit card debts(external link) — Banking Ombudsman Scheme
You can apply to your bank or credit card company to reverse a charge on your credit card. This is called a credit card chargeback and includes any interest paid. Generally, the bank should agree to a chargeback if your credit card was debited by mistake or fraud. Other reasons for getting a chargeback include the wrong products being delivered or something you paid for not being delivered at all. You can't get a chargeback because you changed your mind about a purchase.
There is a time limit on when you can apply for a chargeback — check the terms of your credit card contract, which are displayed on their website.
If you're having problems with your bank, ask the Banking Ombudsman to help.
Chargebacks(external link) — Banking Ombudsman Scheme
Loans and credit
If things go wrong
If your credit card is lost, stolen, or compromised, contact your card issuer immediately. They can stop all further transactions on the card, and you may be able to get a refund for fraudulent transactions (check your credit card terms and conditions).
If you have paid for something with your credit card and it is not delivered or the wrong thing is delivered, you can ask the issuer for a chargeback.
Example — Credit card transfers
Chuntao decides to transfer her current credit card debt of $5,000 to a new credit card provider as they are offering a 0% interest rate if you transfer to them. The 0% interest rate lasts for six months, then jumps up to the standard interest rate of 18%. Chuntao managed to pay off nearly $3,000 of her balance while it wasn't earning interest, but now the remaining balance will earn interest at the higher rate.
Example — Chargebacks
Dominic rang an 0800 number to order a set of tools he saw advertised on TV and charged it to his credit card account. Four weeks later, after multiple attempts to contact the company, the tools still hadn’t arrived but Dominic’s credit card account had been debited. Dominic should contact the bank as soon as possible and make a chargeback application.